The Art of the Spinoff

Leigh Buchanan is an editor-at-large for Inc. magazine. A former editor at Harvard Business Review and founding editor of Webmaster Magazine, she writes regular columns on leadership and workplace culture.

Maya is a $6.5 million technology design and research consultancy that grows, in CEO Mickey McManus's words, "by cell division."

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Entrepreneurs often leave companies to do their own thing. They flock to Maya Design for the same reason. Maya is a $6.5 million technology design and research consultancy that grows, in CEO Mickey McManus's words, "by cell division." Over the years, the Pittsburgh-based company has spun off four businesses, and it has two more in the works.

Successful spinoffs bestow multiple blessings on their parents, allowing companies to grow and diversify while retaining the efficiency and agility of a small business. Although spinning off businesses isn't a new concept, most companies tend to treat spinoffs opportunistically. An employee typically submits a business plan to the owners. If the plan makes sense, there's enough capital around, and the aspiring entrepreneur can be spared, the company may take a swing. Maya takes a more systematic approach -- it has developed an infrastructure that can support one or three or five additional businesses.

Maya was chiefly a design-consulting firm when it began launching spinoffs in 1998. At that time, it was eager to develop data-visualization software for the military but feared that that might become a distraction. Its solution was to create two companies. Maya Design would handle the regular consulting work. A new business, Maya Viz, would develop the software for the military. Its founding team, mostly brought in from outside, would start as salaried Maya Design employees until Viz proved profitable. Meanwhile, Maya Group, another new company, would provide HR, accounting, legal, IT, and other support services to Maya Design, Maya Viz, and future spinoffs.

Spinning off businesses in this way allows Maya to market products and other offerings that are complementary but not related to its core businesses. Two spinoff ideas being proposed involve iPad accessories and modular computing -- potentially lucrative niches that are not naturally at home in a consulting company. Spinoffs are also easy to sell when the opportunity arises. Maya Viz was sold to General Dynamics in 2005.

Maya Design incubates each spinoff for at least a couple of years, until it books enough business to stand on its own. Maya retains a majority share in each new business, but when a company spins off, its CEO and other founding principals -- drawn from Maya Design or from outside the company -- receive equity in the new business.

This model has allowed Maya to recruit people like Chris Pacione, a founder of health-monitor company BodyMedia, whose products are used on the TV show The Biggest Loser. In 2008, BodyMedia was approaching its 10th year in business, and Pacione was contemplating a change. Enter Maya, looking for a tested entrepreneur to take its idea for a design-education company and run with it. Today, Pacione is CEO of Luma Institute, a spinoff that sends experts into companies and schools to teach design.

Maya attracted serial entrepreneur Josh Knauer in a similar fashion. In 2002, Knauer sold his company Green Marketplace, a vendor of environmentally friendly products. He joined Maya the following year. Maya offered Knauer the opportunity to spin off some of its homegrown software into a separate business in a family-friendly environment that allowed him to spend ample time with his infant daughter. "I couldn't glow enough about what happens here," says Knauer, CEO of Rhiza Labs, a spinoff that makes online mapping software. "I can't think of a better model than Maya's for starting slightly disruptive technology companies."

The CEOs of the spinoffs aren't the only ones who benefit. The presence of the new ventures, which share offices with Maya Design, provides everyone in the company opportunities to try different kinds of projects, work with a variety of customers, and pursue new career paths, says McManus. He estimates that 80 percent of Maya Design's 32 employees have worked on one of the spinoffs. Rhiza Labs temporarily hires Maya developers when its six employees are swamped. Luma, which has only three employees, calls on Maya designers to teach at its clients' facilities. Teaching "breaks up the pace for them and gives them an opportunity to become better designers, because that's what happens when you teach," says Pacione.

Every week, the leaders of the spinoffs convene to share best practices and wrangle over resources, which typically means people. Employees from one business are welcome to apply for permanent positions at any of the others, but poaching talent is forbidden.

Some Maya employees want to start their own spinoffs. The staff gathers periodically to brainstorm ideas, and several employees have presented business plans. McManus says two of the plans sound promising, and he has put one of the aspiring entrepreneurs in charge of a large project to test his leadership ability. "In typical companies, when people aren't getting enough variety or want to strike out on their own, they quit," says McManus. "We hold on to our people and help them scratch that itch."

To read how Grasshopper, a provider of virtual voice-mail systems, is using spinoffs to reach its goal of serving one million small businesses, go to www.inc.com/keyword/jul10.